Voyage Linux is a fairly new contender in the embedded space. Based on Debian Etch, it weighs in at about 64 megabytes.
Read about it at Enterprisenetworkingplanet

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A nice feature it retains is apt-get for package management, so you'll need to allow extra room for package management. 128 megabytes should be plenty. This is unusual for tiny Linux distributions, which usually jettison any package managers to save space. But somehow the Voyage Linux developers figured out a way to keep it. So you don't have to learn a new specialized command set, or weird hacks for updating, adding, and removing software- the ordinary old Debian way works fine.